Canadian Solar, Inc. (NASDAQ:CSIQ) reported its second-quarter financial results before Thursday’s opening bell.
Below are the transcripts from the Q2 earnings call.
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OPERATOR
Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar second quarter 2025 earnings conference call. My name is Daryl and I will be your operator for today. At this time all participants are in a listen only mode. Later we will conduct a question and answer session. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Winna Wong, Head of Investor Relations at Canadian Solar. Please go ahead.
Head of Investor Relations
Thank you operator and welcome everyone to Canadian Solar’s second quarter 2025 conference call. Please note that today’s conference call is accompanied with slides which are available on Canadian Solar’s Investor Relations website within the Events and Presentation section. Joining us today are Dr. Sean Chu, Chairman and CEO Yan Zhuang, President of Canadian Solar subsidiary CSI Solar, Ismail Guerrero, Corporate VP and President of Canadian Solar subsidiary Recurrent Energy, and Senior VP and cfo. All company executives will participate in the Q and A session. After Management’s formal remarks on this call, Sean will go over some key messages for the quarter. Yan and Ismail will review business highlights for CSI Solar and Recurrent Energy respectively, and Hugo will go through the financial results. Sean will conclude the prepared remarks with the business outlook after which we will have time for questions. Before we begin, I would like to remind listeners that Management’s prepared remarks today, as well as their answers to questions, will contain forward looking statements that are subject to risks and uncertainties. The Company Claims Protection under the Safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform act of 1995. Actual results may differ from Management’s current expectations. Any projections of the Company’s future performance represent Management’s estimates as of today. Canadian Solar assumes no obligation to update these projections in the future unless otherwise required by applicable law. A more detailed discussion of risks and uncertainties can be found in the Company’s Annual report on Form 20F filed with the securities and Exchange Commission. Management’s prepared remarks will be presented within the requirements of SEC Regulation G regarding Generally Accepted Accounting Principles or GAAP. Some financial information presented during the call will be provided on both a GAAP and non GAAP basis. By disclosing certain non GAAP information, Management intends to provide investors with additional information to enable further analysis of the Company’s performance and underlying trends. Management uses non GAAP measures to better assess operating performance and to establish operational goals. Non GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. And now I would like to turn the call over to Canadian Solar’s chairman and CEO Dr. Sean Chi Sean, please go ahead.
Dr. Shawn Qu
Thank you Wina and thank you all for joining our second quarter earnings call. Please turn to Slide 3. In the second quarter we delivered 7.9 gigawatts of modules near the end of our guidance. Near the high end of our guidance, storage shipment reached 2.2 gigawatt hours below guidance. Due to tariff impacts, we shifted deliveries into the second half. Revenue totaled $1.7 billion for the quarter. Also impacted from certain project sales delay. Gross margin exceeded guidance at 29.8% driven by a higher mix of North America module shipments with notable contributions from our Texas module factory which has made strong progress in ramping up robust storage performance. Further supported margins profitability was weighted down by certain non recurring operating expenses, including the impairment of remaining legacy manufacturing assets. As a result, we reported net income attributable to shareholders of $7 million or a net loss of $0.08 per diluted share due to the pick accounting for our preferred shareholder of recurrent over the past few months, our industry has faced a challenging policy environment. While the industry continues to adjust to the recently passed One Big Beautiful Build Act, I would like to discuss some potential impacts. At this time. Please turn to slide 4. The One Big Beautiful Bills act has sweeping implications for both supply and demand in the US on the supply side, solar and storage domestic onshoring is challenged by increasingly stringent FOCI requirements and higher import due dates on both equipment and components. According to Wood McKenzie, up to 23 gigawatts of operating solar module capacity could be affected. Cell capacity, which requires more complex manufacturing process and higher capital expenditure, could also moderate. On the demand side, outlooks across solar energy storage and distributed generation appear mixed other than for projects that have been safe harbored. The Investment Tax Credit or ITC for solar will phase out by the end of 2027. Meanwhile, energy storage projects must navigate annual FOCI threshold to maintain developer credits. Despite this near term uncertainty, the long term outlook of our industry remains strong. AI cryptocurrency and other energy intensive applications are driving rising electricity demand and Solar plus storage is among the most cost competitive solutions to meet this demand. Future growth will continue to be underpinned by solid fundamentals. As with challenges we have overcome in the past two decades, we believe that a new paradigm creates new opportunities. Today, every part of our business is deeply engaged in the US Market. We deliver both solar and storage solutions across utility scale, DNI and residential applications. We are a domestic manufacturer and a local project developer. We remain committed and will do what is necessary to continue prioritizing this market. Another ongoing commitment is our focus on sustainability. On May 29, we released our 2024 sustainability report. Please turn to slide 5. We are proud of our continued progress in our sustainability journey and reporting standards. In 2024, Canadian Solar reduced greenhouse gas emissions, energy, water and waste intensities by 54%, 37%, 75% and 53% respectively compared to 2017 levels. Consistent with our commitment to improving our environmental footprint, we increase the percentage of recycled and reused waste to 94% in 2024 while maintaining 100% recycling or reuse of all packaging materials used in our production process. We also continue to uphold the highest standards of tactical business conduct across our supply chain. After receiving silver level recognition in 2023 for the RBA VAP audit of our Thailand module facility, we achieved another silver silver level recognition this year for our solar cell factory in Sichuan, Jiangsu province, China. In 2024, we conducted 147 supplier ESG audits including 31 on site evaluation surpassing our 2023 totals. Following collaborative consultations and corrective action plans, all suppliers met our stringent ESG criteria. With that, I will now turn the call over to Yan who will provide more details on our CSI Solar business. Yan, please go ahead.
Yan Zhuang (President of CSI Solar)
Thank you. Sean, please turn to Slide 6. In the second quarter of 2025, module shipments reached 7.9 gigawatts near the high end of our expectations. Energy storage deliveries were below guidance due to tariff impacts, shifting some shipments to the second half. Despite this, we still delivered one of our strongest quarter with 2.2 GWh of storage shipments. Revenue reached $1.7 billion with gross margin expanded 890 basis points quarter over quarter to 22.3%. This increase was primarily driven by a stronger mix of North American module volumes and the installation surge in China which increased both industry wide volumes and pricing. As a result, we achieved a sequentially higher average selling price in our module business. Strong storage volumes and healthy margin further reinforced gross margin performance. Given the phase out of legacy PERC technology, we wrote down our remaining related assets together with other smaller non recurring items. Operating expenses rose sequentially from 13.2% to 15.3% of revenue and we delivered $121 million in operating income. Although costs in the module business remained stable in the second quarter, we are now seeing rising supply chain costs driven by the anti-involution campaign in China combined with tariffs, duties and the incremental impact of underutilization. These factors will raise per-unit costs in the second half while module pricing shows signs of improvement. We expect price increases to lag rising costs, creating pressure on module profitability. We expect additional pressure from normalizing storage margins. The cost benefit from decreasing lithium carbonate prices, which supported gains in 2024 and the first half of this year, is now tapering off. For more details on this business, Please turn to Slide 7. In the second quarter, we recognized revenue on 2.2 gigawatt hours of storage solutions with sizable deliveries to customers in Europe, North America and Latin America. Due to tariffs, some opportunities shifted into the second half and 2026. Importantly, these are not lost opportunities. Demand remains robust and we continue to actively support customers in navigating trade related uncertainties. As of June 30, contracted backlog including Long Term Service Agreement was $3 billion. To support our growth, we are expanding our globally diversified capacities from 10 GWh of gas to and 3 GWh of battery cell today to 24 GWh and 9 GWh respectively by 2026 year end. The expanded batch capacity will enable us to scale shipments as needed from quarter to quarter with additional headroom if we add working shifts. Our battery cell capacity also strengthens our upstream strategy by helping us manage risk across cycles while providing customers with greater supply chain flexibility. The market is growing quickly and we are scaling alongside it. To remain competitive, we must continue to uphold the highest safety standards and drive product innovation. Please turn to Slide 8. In June, we successfully completed large scale fire testing for our SoBank 3.0 energy storage system. The test confirmed that our system meets key fire safety criteria by containing thermal events within the single enclosure. The results were independently witnessed and verified by both CSA Group and the Energy Safety Responses Group. In residential storage, EPQ won the Japan International Pioneer Design Award or IDPA in the Electrical Products category. This award was established in 2018 in Tokyo and has since become one of the most influential international design awards for pioneering design globally. This quarter, our proprietary residential energy storage system also earned the prestigious Red Dot Award, often described as the Oscars of industrial design. These recognitions are in addition to the IF Design Award and the Museum Design Gold Award that EPCUBE received earlier this year. EPCUBE has made strong progress in its target markets since we earned the prestigious Jet Compliance Certification. Shipments to Japan have surged now approaching 1000 units per month. We’re also steadily advancing in Europe and the us we expect significant growth ahead in this business and we continue to develop other emerging profit drivers such as bundled cell solutions. With that, let me hand the call over to Ismail, who will provide an update on recurrent energy Canadian Solar’s global project development business Ismail, please go ahead.
Ismail Guerrero (Corporate VP and President of Recurrent Energy)
Thank you. Jan, Please turn to Slide 9. In the second quarter we generated $106 million in revenue. Revenue was sequentially lower, primarily due to lighter project sales. We monetized over 200 megawatts of projects in Europe and Japan, including our first profitable sale of a battery storage project in Italy, while a large project sale in Latin America shifted into the second half of the year. Gross margin was 32.4% reflecting healthy project sales returns and a stable margins in electricity sales from our operating portfolio and growing power services business. The solar power system write down in Latin America combined with other non recurrent expenses led to elevated operating expenses and an operating loss of $74 million. We remain focused on disciplined execution while managing ongoing trade and policy risks. We energized Our First merchant 200 megawatt-hour Fort Duncan storage project in Texas. Despite Ford Duncan being a merchant storage project, we were able to secure both project finance and tax equity for this. Project. Within the quarter. We also achieved an important milestone at Blue Moon Solar in Kentucky, closing $260 million of project financing and tax equity. The offtaker for this project is Constellation, who will purchase power and renewable energy certificates generated by this nearly 100 megawatt facility. Please turn to Slide 10 for an update on our pipeline. As of June 30, 2025, we own interconnections for 8 gigawatts of solar and 16 gigawatt hours of storage globally. Excluding projects already in operation. Our total pipeline now stands at 27 gigawatts of solar and 80 gigawatt hours of storage. In the US and Europe, we have 500 megawatts of solar and about 1.7 gigawatt hours of storage already in operation. Meanwhile, we are building more than 1.3 gigawatts of solar and 600 megawatts of storage in these markets as we speak. This positions us with one of the largest and most globally diversified pipelines in the industry, giving us significant runaway to grow in the future and the flexibility to focus our resources to advance the most attractive projects and markets. In the US we have already safe harbor 1.6 gigawatts of solar projects that are in execution or late stage development. We continue to execute our Safe harbor strategy on an additional 2.3 gigawatts of solar through off site start of construction, providing both increased flexibility over the coming years and a competitive advantage as U.S. assets gain value under the updated tax credit policies. At the same time, we are expanding our battery storage pipeline, particularly in the us, Europe and Japan where we already hold strong market positions. Our O and M business continues to gain traction with 10.5 gigawatts currently in operation and 3.2 gigawatts contracted coming into service in the next quarters. Finally, we are advancing development of our data center sites in both the US and Spain where we expect to have the first projects ready within the next few quarters. Now I will hand the call to Shimbo to review our financial results. Chimbo, please go ahead.
Unknown
Thank you. Ismael, Please turn to Slide 11 in the second quarter we delivered 7.9 gigawatts of modules near the high end of our guidance. We shipped 2.2 gigawatt hours of storage below expectations due to delayed shipments with the additional impact of delayed project sales. Total revenue was $1.7 billion. Gross margin was 29.8%, elevated by a sale type fee related to a US project and an AD/CVD and UP adjustments. Excluding this one time impact, gross margin would have been 21.6% sequentially higher due to the strong due to a stronger North American module mix and storage volumes. Operating expenses increased to $378 million primarily due to non recurring items including impairment charge related to certain solar and storage assets as well as manufacturing assets. Without these items, operating expenses would have been $259 million or 15.3% of revenue compared to 16.3% in the fourth quarter. Net interest expense rose from $28 million in the first quarter to $35 million, reflecting higher borrowings at recurrent energy and lower interest income. Net foreign Exchange loss was $13 million, primarily driven by dollar’s weakness. Net income attributable to shareholders was $7. Million. Or a net loss of $0.08 per diluted share. This result included a positive $30 million HLBV impact, or $0.45 per share from tax equity arrangements tied to certain US projects. $0.19 per diluted share of preferred dividend impact led to the diluted loss per share to shareholders. Please turn to slide 12 for cash flow and the balance sheet. Net cash inflow from operating activities was $189 million compared with an outflow of $264 million in the first quarter. Cash inflow was primarily driven by changes in working capital, specifically a decrease in inventories. Total assets grew to $14.8 billion with project assets rising to $1.7 billion. Solar power systems and battery energy storage systems now stand at $2 billion CapEx. Total $173 million, mainly reflecting payments for existing capacities. Our full year 2025 CapEx outlook remains unchanged at approximately $1.2 billion, primarily driven by investment in US manufacturing initiatives. Total debt increased to $6.3 billion, mainly due to new borrowings for project development and operational assets. We closed the quarter with a cash position of $2.3 billion. Looking ahead, we remain focused on disciplined debt management and prudent liquidity oversight aligned with industry dynamics and our financial fundamentals. In light of ongoing profitability pressures in both manufacturing and the project development businesses, we expect to gradually reduce leverage from current levels over the next month. Now let me turn the call back to Sean who will conclude with our guidance and the business outlook. Sean, please go ahead.
Dr. Shawn Qu
Thank you. Jimbo, please turn to Slide 13. For the third quarter of 2025, we expect to deliver module volumes between 5 to 5.3 gigawatt. For energy storage shipments, we expect to deliver 2.1 to 2.3 gigawatt hours, including about 250 megawatt hours to our own project. We project third quarter revenue to be in the range of 1.3 to $1.5 billion, with gross margin expected to be between 14 to 16% sequential. Lower margins reflect the impact of rising solar manufacturing costs driven in part by supply chain price increases and normalizing storage margins. For the full year of 2025, we are narrowing our module volume guidance to 25 to 27 gigawatts including approximately 1 gigawatt to our own project. The reduced midpoint of our marked module guidance primarily reflect our self-restraint which results in a decision to reduce exposure to less profitable markets for energy storage shipments. Given increased near term visibility in the trade environment, we are maintaining our storage shipment guidance of 7-9 GWh for the full year of 2025, including approximately 1 GWh allocated to our own project. We are revising our full year revenue guidance to between 5.65 and $6.3 billion. This reflects the delay of certain project sales into 2026 and more conservative module pricing in the second half, driven by weakening demand in China. With that, I would like to now open the floor for questions.
Operator
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment for Your first questions. Our first questions come from the line of Colin Rush with Oppenheimer. Please proceed with your questions. Thanks so much, guys.
Equity Analyst at Oppenheimer
Now, could you talk a little bit. About the PERC right down here and the impact ultimately on margins? I’m just trying to get a sense of how much that really impacts from a percentage basis on your margin sale or on your module sales. Does that start to look like two or three points or is it a little bit more than that?
Dr. Shawn Qu
Well, we decided to roll off pretty much all of our PERC equipment asset this quarter because in Q2 we stopped the manufacturing of PERC product. So we think this is the right time to the write off. Now the write off was, I believe was quite a big impact. Yeah, it’s 46 million. Okay, but I’ll follow up on the manufacturing afterwards. You know, just with the, the treasury rules that have come out, I think everybody’s trying to understand how developers are going to approach their safe harboring strategy and qualification. Can you guys give us a sense of where you’re at from a safe harboring perspective, what you’re seeing from any of your customers on the module side and how you anticipate some of the enforcement realities for the industry given just your first look in less than a week of being able to evaluate the new rules? Yeah. Colin, as you know, our subsidiary Recurrent is a long term player with 20 years of operating in the US market. So we have been safe harboring several times because ITC reached the deadline several times in the past 10, 13 years. So every time we approach the deadline we safe harbor. So we are very, we have a very, we are very familiar with the role. So. And we’re pleased to see that the newly released guidance, the new guidance for the Safe harbor pretty much confirmed that our standard strategy for safe harbor is correct and also is prudent. So our current Safe harbor project, we see no change. And as Ismail said in his speech, we are safe harboring a little bit more. Well, actually we are safe harboring 2.3 gigawatt more of project. So if Recurrent achieve this goal, then 1.6 plus 3. 2.3. No, 1.6 plus 2.3. Well, we will be able to safe harbor somewhere close to 4 gigawatt. So that will give us a very strong pipeline in U.S. you know, 4 gigawatt is almost equal to 1 gigawatt each year. So you can see that for say four years. Safe harbor is pretty significant for us. It shows our strong ability, recurrent strong ability and very solid practice in the development procedure. As for the whole industry, that’s a good question. We have been sending our or Internet up, but it has only been a few days so I don’t have that much industry wide Safe harbor information. However, I would say for the developers who have similar experience, they should see the same thing as recurrent. So I think the industry is relieved that at least their work so far has been recognized. Ismail, do you want to add some more colors?
Ismail Guerrero (Corporate VP and President of Recurrent Energy)
Look, I think. Colin, thanks for the question. I think we’ve been a little bit lucky too because many of our projects had local community others. So we started to Safe harbor to make sure that we enjoy those others. And as a result we have a pretty advanced pipeline of safe hardware already online and we always use the off site start of construction. So it looks like the current regulation is not changing that. So we’ve been a little bit lucky this time.
Equity Analyst at Oppenheimer
Okay, thanks so much guys.
Operator
Thank you. Our next question has come from the line of Philip Shen with Roth Capital Partners. Please proceed with your questions.
Roth Capital Partners
Hi, this is Matt Ingram on for Phil. Thank you for taking our questions. You know, given the OBBB and FIAC. In the U.S. do you believe Canadian Solar and its subsidiaries are currently fiat compliant?
If so, could you please give some details around what gives you confidence and then if not like, what steps are you taking to comply with fiac? And then lastly on fiac, how are you planning for potentially stricter FOCI IRS guidance that could come out sometime next year?
Dr. Shawn Qu
Mark, thank you for the question. I kind of expected this question. Now, as you know, OBBBA have different FOCI requirements for different years. So based on that yearly FOCI requirement. Yes, Canadian Solar is complied with OBBBA requirement at this moment and we will continue, we believe we will continue to be compliant for the future years. As you know, every year the FOCI condition change, including the percentage change. So we have a plan to make sure that the Canadian Solar 3 factory, which is a solar module factory, solar cell factory, and also the energy storage factory, continue to meet the OBBBA requirement each year.
Roth Capital Partners
And just on, you know, potential guidance. You know, they’re going to release guidance on the FOCI restrictions and those potentially could be, you know, a little bit stricter than kind of the language that’s in the bill. Are you, how are you guys planning for that kind of situation?
Dr. Shawn Qu
Well, we, our internal legal team, accounting team and the external teams have debated and due diligence in the past one and a month, ever since July 4th when the Obba was signed the law. We have been studying it and debating and doing due diligence. So we think our understanding of the bill is pretty conservative and well, there may be some changes or some clarifications of the guidance, you know. Oh, well, I mean the IRS guidance might clarify some of the points, but I believe as long as those are the guidance to interpret the obbba, it can’t change very much from the legal language itself in the bill. Therefore, we believe some, well, a little bit more restrictive, a little bit less restrictive guidance from IRS will not change our judgment call. So I think our current strategy is quite solid so that we can first of all, we make sure our customers will be able to claim their ITC because our chairman meet the OBBBA rule of that particular year and also our factory three factories in US will be able to claim the 45x for any of the particular year. Great. Really appreciate the color there, Sean. If I could just squeeze in one more on policy, you know, given like the upcoming Section 232 case on polysilicon and its derivatives as well as it seems like they’re reinforcing UFLPA with Q cells getting recently detained.
Roth Capital Partners
You know, how are you guys looking at your upstream supply chain and maybe different strategies there for the U.S. capacity?
Dr. Shawn Qu
Well, you probably know that Canadian Solar filed our comment to Department of Commerce for the for the section 232 polysilicon. And I believe you, you can get access to our filings through your lawyer or whatever. So basic. But basically we believe that polysilicon for solar is not a national security concern because I don’t think us even want that much solar anyway. So why is solar grade polysilicon a national security control, you know, concern? The country have enough coal, oil, gas, you know, everything, right? The country is very fossil fuel planted so that based on that we don’t feel like polysilicon for solar should be a national security control. However, we are waiting for the process to run to the end and at this moment I don’t want to speculate. Okay, great. Thanks for the answer, Sean. I’ll pass it. Thank you. Our next questions come from the line of Mahip Maloy with with Zuho Securities. Please proceed with your questions.
Mizuho Securities Analyst
Hey. Hi. Thanks for taking the questions. Let me just follow more on the FIAC side. Appreciate the color there. But we can just talk more about. The 45x eligibility for the US assets. So you have the US manufacturing line or the strategy to be compliant there. Or do you need more information from treasury guidance to help with that? And then I have a follow up quickly on Tariff.
Dr. Shawn Qu
Yeah, well, I think our, you know, our team, including our internal legal team and our external councils believe that OBBBA is quite clear in terms of the FEOC and the material assistance definition and requirement. So we pretty much understand the meaning of those language and clauses. As I mentioned that the IRS guidance may clarify a few points. But as long as those guidance follows the language in the OBBBA itself, then I think our strategy is we have a good understanding. Therefore our assessment is solid. And for 45x, both the 45x and for energy storage and for solar will continue according to the previous schedule. As you know, there’s no change in terms of the schedule, in terms of the time frame and also the rundown schedule of those incentives. And however there are different material systems table for each year. So we just have to every year we do our due diligence and calculate and just to make sure that our product meet those tables. And fortunately solar is a global manufacturing. Energy storage is also more or less a global manufacturer. So there are suppliers of the key material for both solar and for energy storage from several different countries. So I believe that gave us the ability to navigate the navigate and to meet to comply with the material assistance requirement and percentage for each year. Now you mentioned IRS guidance. Well, you know, people have been speculating how much, you know, maybe the IRS guidance can help people a little bit. For example, IRS published a table for the domestic content in the past which stop guessing each component a guidance specified percentage. So it makes the job easy and also standardize it. So we will see whether the IRS guidance for material assistant follow the same thought, same path or maybe follow a different path. So for me, you know, that’s something we are waiting to see. If somehow it follows the same path. Well it stop then at least everybody will use the same table. But maybe we’ll follow a different path for material assistance. So that’s something we are waiting to see. However, as I said, the OBBBA itself is already quite clear. For example, it defined the component like to be for example over 60% for 2026 for energy storage and I believe 55% right, or 50% for solar. So that’s pretty clear. Any company who have employed a few capable accountants can do their calculation. So yeah, just with this language we can already calculate our percentage. But if IRS instead publish a table for everybody to use, that also work. So I think one way or another we already calculated look at our product, we think our so far at this moment our percentage will be way over above the minimum requirement for the next few years. So that’s why I think we are we have a good strategy to be OBBBA compliant. Thanks.
Mizuho Securities Analyst
And a picture of the color on the material system maybe just like quick. One on the 45X to get that. Do you anticipate reducing CSI Solar’s ownership in the US manufacturing? Just trying to understand the strategy there. And the timeline on when to expect any changes in the in the structures of the US Manufacturing business. Thank you.
Dr. Shawn Qu
Now this year we don’t have to you know our structure comply. Next year and the year after we will. Every company will have to do something to make sure they always comply with the obba. Canadian Solar do the same. As I said we have a strategy so we will be able to be I think we have a solid strategy to be OBBBA compliant every year. Thanks for the caller. I’ll take the rest offline.
Operator
Thank you. Our next question has come from the line of Alan Lau with Jefferies. Please proceed with your questions.
Jefferies Equity Analyst
Thanks for taking my question. Would like to ask on there was a meeting in China I think it was probably on Tuesday in the Ministry. Of Industry and Information Technology. So first of all we’d like to. Know if Canadian Solar has participated in. That meeting and then secondly is do you think the price hike in China would lead to price hike in the rest of the world as well?
Dr. Shawn Qu
Canadian Solar representative well the Canadian Solar China factories received invitation so we send representative to the meeting and the government in Beijing is trying to resolve some of the supply demand balance issues. So I think it’s a good approach and this is also I think this is what other countries have been expecting China to do. So I’m glad the Chinese government got the message and start to work with the industry to for a better balance of supply and demand. So I heard there was clear guidance on a higher module price after the. Meeting so because without briefing I remember. We mentioned that we expect this manufacturing cost hike I guess it’s the cost. Hike in polysilicon and wafer but if. Module prices are higher do you think that would actually improve your margins? Well I think yeah. Answer to your question Yan said we have seen upstream material price increase. I’m not going to say hike that much but we saw some increase especially the polysilicon in gang wafer and Yan said we expect the module price to go up but maybe lack the the movement of the materials yen you want.
Yan Zhuang (President of CSI Solar)
To yeah so there’s no top down minimum pricing on module however there’s industry few there’s a company volunteered to actually put on some more Discipline, you know, some. Some predefined price, but that’s not a top down and the execution for that price was not carried with high efficiency. So I have to say so it’s basically still mostly market driven. The upper stream is actually price went up because it’s easier for upper stream because the lack of number of players. So that’s why I said module price likely to go up as well, but maybe not as much as the upper stream yesterday night.
You’re breaking. Sorry. You were breaking. We hear you. Hello? Can you hear me? Can you hear me? Yes. Yes.
Jefferies Equity Analyst
So we’d like to know your view on the US solar demand because President Trump yesterday has posted that kind of. He would not approve any projects, etc. So how do you think like the demand in US and how much project might be affected with the federal land approval requirement?
Dr. Shawn Qu
I don’t know. Well, not a market survey company, so you ask the wrong person. And I don’t want to comment on White House speech. Also I don’t want to comment.
Thanks a lot.
Operator
Thank you. Our next question has come from the line of Vikram Bagri with Citi. Please proceed with your questions.
Citi Group Equity Analyst
Hi, good morning everyone. And I apologize in advance for asking another question on fiac. But the press release mentioned that there has been some push outs and I saw that the storage backlog declined marginally also in second quarter. I didn’t see a pipeline number in the presentation. I was wondering if you saw any cancellations in the quarter and if there is a common theme that explains the pushouts or slash cancellations in the quarter. Is FOCI playing a role? Are customers asking for confirmation of compliance in a contract before signing a contract and that’s sort of like creating an uncertainty or slow down in backlog bookings. If you can just explain the pushouts and cancellations and if it’s somehow related to fiac.
Dr. Shawn Qu
The new FOCI requirement also take effect next year. So this year’s project, if the project reached COD this year, there’s no new FOCI requirement. So however, I mean we mentioned that there are some projects pushed to second half due to tariff issues. So tariff is different from fiac. I also want to clarify that our pipeline didn’t go down. We delivered 2.3 gigawatt hours, but we add new pipelines. So our new energy storage pipeline in terms of dollar value actually went up a little bit. You can find that in our press release. So actually we do have some major deals that is at the very last stage of negotiation. So there’s some big numbers there.
Citi Group Equity Analyst
Got it. And as a follow up, you mentioned that the storage margins without the benefit of falling lithium carbonate pricing have been normalizing. Historically, you’ve mentioned 20% margins and later on 15 to 17% margins. Is the second half lower than 15%? Any indication on current margins or margin on backlog would be helpful.
Dr. Shawn Qu
We’re working on the 20% as a target.
Got it. Thank you. Thank you.
Operator
We have reached the end of our question and answer session. I would now like to turn the floor back over to management for any closing comments.
Dr. Shawn Qu
Thank you for joining us today and for your continued support. If you have any questions or would like to set up a call, please contact our investor relations team. Take care and have a great day.
Operator
Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
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